• Lower growth, higher inflation will follow in the months ahead
• Inflation to start declining in Q4 this year
• Main concern is second round effects of inflation
• A wage price spiral will be very detrimental for the economy

Just some token remarks there by de Guindos but once again it just reaffirms the narrative that central banks are continuing to kick the can down the road when it comes to the timeline of getting inflation „under control“.

This article was written by Justin Low at www.forexlive.com.

• Frontloading rate hikes is a good idea in this situation
• It means that we can stop inflation before it becomes entrenched
• Would like for rates to move up to 3.50% by year-end

Central banking these days have never really been about going „according to plan“. Remember when policymakers were telling us that inflation was just ‚transitory‘? The last echoes of that sentiment wasn’t even a year ago. Pfft.

This article was written by Justin Low at www.forexlive.com.

• Households have much savings from the pandemic
• No sign from households that they are pulling back on spending meaningfully
• Labour market is very strong
• Rate hikes will slow down the economy but only slow it down to trend growth
• There will just be a moderate slowdown in the economy, not a major one
• It will be unusual to return to a recession unless there is a big shock
• We are not even near neutral rate yet to control inflation, so too early to talk about recession probabilities

There isn’t anything here that suggests that he is on the same page as Powell about demand destruction and he is certainly going out of his way to reassure that a recession isn’t imminent in the US.

This article was written by Justin Low at www.forexlive.com.

• Australian economy is remarkably resilient
• The challenge is to bring down inflation painlessly

Just some token remarks by Lowe in a speaking engagement. After delivering some rather unorthodox rate hikes recently, it will be interesting to see what the RBA will go with next on 5 July.

This article was written by Justin Low at www.forexlive.com.

While the yen stole the spotlight in trading yesterday, the franc continues to do its work steadily following the SNB policy pivot two weeks ago. As mentioned then, the change has definitely shaken up the landscape of the major currencies bloc and puts the franc at among the frontrunners considering the timing of the surprise and how shaky markets look at the moment.

The swissie is the top performer today with USD/CHF itself down 0.5% to 0.9565 while EUR/CHF is testing daily support from the April lows at 1.0088-89 again currently. A firm break below that opens up another shot at parity for the pair and this time there might be more conviction to break that after the attempt in March failed.

• Parity now the new normal in EUR/CHF – Credit Agricole (22/06)
• EUR/CHF: Core target at 0.9830; ‚measured triangle objective‘ at 0.9600 – Credit Suisse (20/06)
• Parity beckons for EUR/CHF (17/06)

This article was written by Justin Low at www.forexlive.com.